The company will continue to perform routine store maintenance. Store base is in good shape overall. Over 2700 stores or 87% of store base has been opened, relocated or remodeled since 1999. The company has discontinued Advance TV network in stores. The company has eliminated certain advertising expenditures that it determined were not productive in driving sales. The company is testing and measuring other portions, including print advertising program and the results of those tests will drive advertising decisions for 2008.

The company believes it will see some impact from the sales drivers over these next two quarters, but it expects it to be minimal in the short term. Internally, it will take most of this time period to implement initiatives and externally, the economic headwinds may continue to be a negative for sales growth for the remainder of the year. The company believes high gas prices have reduced customers'' ability to pay for needed repairs and have increased maintenance deferrals. The company anticipates that over time customers will adjust their budgets and it will see a benefit when this deferred maintenance is performed.

Up-to-Date Financial Highlights

- Autopart International continued to grow with an additional 13 stores so far in 2007, bringing their total store count to 100.
- The company has opened 113 new stores, 100 of Advance and 13 of AI.
- The company closed 8 stores.

- The company has remodeled 61 stores. The reduced scope remodels started earlier this year reduced costs. Not enough time has passed to measure the sales results and ROI from these remodels. As a result, the company is halting the remodel program until it has had time to evaluate how it can achieve a higher return on invested capital and better align the program with the findings from customer research.
- The company has relocated 19 stores and foresees approximately 35 relocations in 2007.
- CapEx was $115.7 million, lower than the $132 million spent last year respectively.

Fiscal 2007 Outlook

- In the third and forth quarter, the company will be making investments in parts availability. The company expects to offset a portion of this investment by increase the productivity of existing inventory, rebalancing inventory on selected categories and selected stores. As a result of this parts availability initiative, the company expects that inventory will grow somewhat faster than sales in the second half of the year, but the spread between inventory growth and sales growth will be less than in the second quarter.

- The company is taking a number of steps to reduce capital spending and improve return on invested capital. The company estimates capital expenditures for 2007 to be $230 million to $240 million as compared to previous estimate of $250 million to $270 million. This estimate includes approximately $25 million for 9th distribution center in Indiana. As a result of fewer new store openings in 2007 and 2008, the company has delayed the opening of next distribution center from mid-2008 until the beginning of 2009, which will help SG&A leverage in 2008. With the reduction in CapEx, the company expects free cash flow to grow by more than 80% in 2007 to a range of $150 million to $170 million for the year. This is an increase from prior guidance of $125 million to $145 million.

- In terms of updated guidance, for comparable store sales the company is assuming negative 2% to flat in the third quarter and flat to 2% in the fourth quarter. The company is basing guidance on the assumption that a challenging macroeconomic environment will continue throughout the balance of the year, and because of the implementation timeframe, sales building initiatives will positively impact second half sales to a limited degree. For the second half, the company expects minimal improvements in gross margin percent as it works through the inventory and merchandising initiatives discussed. The company expects to start leveraging SG&A in the second half as a result of expense initiatives implemented.

- The company expects earnings per share in the third quarter to be 53 cents per share to 57 cents per share and for the year to be in the range of $2.24 to $2.32. Included in the third quarter guidance and 2007 year guidance is approximately 4 cents per share in severance costs and asset write offs associated with the reduction in workforce and halting of Advance TV network.

- In line with plans to open 140 to 150 new stores in 2008, the company has reduced planned openings to 190 to 200 stores for 2007. It was previously indicated 200 to 210 new stores in 2007. This represents an approximate 6% rate of growth in 2007 and 4.5% in 2008. In 2007 and 2008, the company anticipates all of new stores will open within existing 40 state footprint.

- The company has allocated sufficient CapEx in budget for 2007 and 2008 to maintain stores on a regular basis during this period.
- The company expects modest LIFO credits in most quarters as it benefits from lower costs in most product categories.
- With the expense reductions, the company expects to leverage SG&A in the second half of the year. The SG&A leverage in the second half before severance and asset write offs of $6.4 million or 57 basis points. With the expense reductions the company has made thus far and further reductions under review, it believes it can leverage SG&A on less than a 3% comparison going forward.
- The company expects tax rate to be in the range of 38.4% to 38.6%.

Key questions from the second quarter earnings call conducted by Advance Auto Parts, Inc. on August 9, 2007.

Anthony Cristello (BB&T Capital Markets): Could you comment on your guidance which given the good quarter you had seems to be conservative?

Jack Brouillard: The main driver of where the company has placed its guidance is the sales environment that it is in right now, and it hopes that it improves beyond what it is seeing right now. The company is conservative, but this is the reality now as it is difficult to generate any sustained comparable sales momentum. The concern the company has is that while it feels good about many of the initiatives, the external environment weighs more heavily in the near term than the ability of these initiatives to give it traction. While it is going to get those SG&A savings, the concern it has is the external environment and what the sales momentum will be.

Jim L. Wade: The comparables in both areas, both DIY and commercial were less than what the company has been running in the second quarter, and that is the basis for the direction on the guidance. The other thing is less gross margin percent improvement as Advance Auto Parts makes all the changes in the implementation of these initiatives from pushing out more parts and the related cost of doing that. That is an area that the company is not as optimistic over the second half of the year as it was before, not because anything fundamentally has changed, but because of the activity that is going to be going on in those two quarters.

Anthony Cristello (BB&T Capital Markets): What do you see aside from what you think you can do internally, just from mixing things around?

Elwyn G. Murray III: The company has increased the intensity and focus on parts availability at a greater level, particularly since May. It had some energy going on prior to that, but in the back half of the year, it was introducing 2 to 3 times what it would have introduced on a regular run rate when it came to inventory related specifically to parts. There are lead times required in this industry in particular with hard parts so it will take Advance Auto Parts longer to get some traction on that, but it is encouraged about the significant emphasis and amount of parts inventory that it is going to be able to get into its stores in the back half of the year.

Jeffrey Sonnek (Friedman, Billings, Ramsey & Co., Inc.): You are cutting advertising spend. How do you communicate to the customer if they are only shopping three times a year and what they are going to find in advance or why should they shop your store versus one of your competitors?

Elwyn G. Murray III: The company is working to determine what is effective in what it spends on advertising and what is not. From that, it is identifying the vehicles that it thinks are going to be critical to deliver its message. It wants to deliver that message when it is poised to deliver for the customer. It is thinking about how it is going to craft its message in and what medium it is going to use to communicate it.